Nautilus wins federal appeal in Icon trademark infringement battle

Taking nearly a year for a decision, the U.S. District Court of Appeals for the Federal Circuit Court has ruled in favor of The Nautilus Group on a July 2003 appeal and granted the company a preliminary injunction in its case against Icon that charges trademark infringement of the Bowflex.

Taking nearly a year for a decision, the U.S. District Court of Appeals for the Federal Circuit Court has ruled in favor of The Nautilus Group on a July 2003 appeal and granted the company a preliminary injunction in its case against Icon that charges trademark infringement of the Bowflex.

That ruling means that Icon Fitness must immediately stop using the trademark "Crossbow." In addition, Icon and its retailers are barred from marketing, advertising or selling any equipment with that name. The preliminary injunction issued by the federal court will remain in effect until the conclusion of the case or of the trial, a date which has not yet been set.

"The court is clearly saying patents and trademark issues are important," Nautilus Chief Customer Officer Tim Hawkins told SNEWSÂ®. "Trademarks and patents are increasingly important components of a company's business infrastructure and investments."

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Icon did not have a response prepared by deadline on June 23, but said it was working on one. (For Icon's official response, see story addendum, June 25, below.)

In the ruling late June 21 by the U.S. Court of Appeals for the Federal Circuit Court, the court, which had stayed a U.S. District Court, Western District of Washington preliminary injunction pending this appeal, stated in its 29-page ruling, "Because we do not find the district court applied the incorrect law, relied on clearly erroneous factual findings, or otherwise abused its discretion in finding a likelihood of confusion to exit between the Bowflex and the Crossbow marks, we affirm the grant of the preliminary injunction."

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In the ruling, however, the federal court considered five arguments to reach its conclusions. Although the final order was in Nautilus' favor, the court did state repeatedly that it agreed with Icon on some counts but not to such an extent to reverse the preliminary injunction.

"We agree with Icon that it was improper for the district court to consider this scant and ambiguous evidence of actual confusion in Nautilus' favor for the purposes of granting a preliminary injunction," the ruling stated on Icon's challenge to the "sufficiency of the evidence presented to demonstrate actual confusion."

"Accordingly, as with the intent to confuse factor, we merely decline to weigh this factor in favor of Nautilus at this early stage in the proceeding," the court added.

In the challenge by Icon to the strength of the Bowflex mark, the court stated, after analysis, "We therefore cannot say that, for the purpose of whether a preliminary injunction should issue, the court clearly erred in preliminarily finding Bowflex to be a suggestive markâ€¦. Further, in the context of our review of the district court's grant of the preliminary injunction, we do not think the court clearly erred in finding that Nautilus has strengthened a presumptively weak suggestive mark through its advertising. Sufficient evidence was presentedâ€¦to demonstrate that the Bowflex mark enjoys a high level of brand recognition."

As Icon legal counsel Brad Bearnson told SNEWSÂ® in March, "It's a horse race at this point." He also described the case as "complicated" with many legal angles.

The patent infringement case, in which a trial has been set for April 2005 by the U.S. District Court of Washington, Western District, in Seattle, continues on a parallel track, with both companies having stated in the past they are not interested in settling, and both have declined previous offers and counteroffers.

"We're unclear whether this will move either us or Icon toward a settlement," Hawkins said, noting he couldn't speak for Icon. "We're exploring these options, but we're willing to see this through to trial if needed."

The legal battle began in December 2002 when Nautilus (NYSE: NLS) filed a suit against Icon charging Icon with trademark infringement and literal patent infringement on the Nautilus Bowflex machine by Icon's Crossbow. Icon introduced the Crossbow by Weider in October 2002. Since then, the trademark and patent cases have been split.

In the last 18 months both companies have won big and lost big, and both have turned to the federal appellate court for additional rulings. For example, in July 2003 the district court granted a Nautilus request for a preliminary injunction on the trademark infringement claims, but the federal court stayed the preliminary injunction and then rejected in September a Nautilus claim to lift the stay pending the above appeal. That allowed Icon to continue to market and sell its Crossbow, although a visit to its website on June 23 shows rather than a Crossbow, a piece of equipment called a CrossBar (click here) as well as a page stating why the CrossBar "beats" the Bowflex "hands down." A link to www.weider-crossbow.com now directs consumers instead to www.platinum-crossbar.com, which according to Network Solutions records was created on June 22 by owner Infomercial.tv. The URLÂ www.thecrossbow.com now directs to www.crossbarfitness.com, which is owned by Icon and was created on July 17, 2003, while www.platinumcrossbar.com is also owned by Icon but was created five months later on Dec. 12, 2003. Nautilus' Hawkins said as of 6 p.m. PST on June 22, the Icon websites still showed the Crossbow.

As to the patent infringement case, in November 2003 the district court dismissed that case entirely, but the federal court sent it back to the district court for consideration in February 2004 based on an appeal by Nautilus. As a result of that federal ruling, the patent case is now moving forward, first toward a so-called "Markman hearing" on Sept. 10 before the scheduled April 2005 jury trial.

In a Markman hearing, both sides present their evidence before the trial judge prior to the jury trial -- much like a short version of a pre-trial trial. The judge then issues opinions about merits of the claims. The theory is, the outcome can increase the likelihood of a pre-trial settlement and therefore avoid a time-consuming and even more costly jury trial. In addition, after a Markman hearing, the successful party may file a motion for summary judgment on patent infringement or validity, which is often granted by the court. As one judge has said about Markman hearings: "to decide what the claims mean is nearly always to decide the case."

"We believe we have a strong case in the patent suit, and we hope this ruling would have some carryover, but it's up to the courts to decide," Hawkins noted.

Although the Bowflex patent expired nearly three months ago on April 27 after two decades, both parties feel there is tens if not hundreds of millions of dollars at stake since damages would be calculated from the time the Icon Crossbow product in question was introduced to the market in October 2002.

"We are very pleased that the federal courts have recognized the strength of our trademark case and ruled in our favor," CEO/President Gregg Hammann said in a statement. "Our company will continue to vigorously protect and defend our intellectual property using all remedies provided by law to which we believe we are entitled, including seeking monetary damages."

On June 22, the day the first announcement of the federal ruling was made, traders seemed confident as Nautilus stock closed at 17.40 or up 5.1 percent, while the price opened on June 23 at 18.52 and closed at 18.10, up another 4 percent.

Addendum: Icon responds to ruling (June 25, 2004) -- Icon released a statement to the media and news wires, which SNEWS was the first to obtain mid-day June 25. It confirmed what SNEWS wrote, above, about the company changing the product's name to CrossBar immediately following the federal court ruling.

"While disappointed in the court ruling, Icon will continue to vigorously defend against the allegations of trademark infringement through the final trial of the matter scheduled for next year," Icon said in its statement.

"The court injunction does not name Icon's retail customers, and it does not prevent sales of identical exercise equipment under names other than the Crossbow brand," said Colleen Logan, Icon marketing chief. "The name change from 'Crossbow by Weider' to 'CrossBar by Weider' will not in any way affect the unparalleled quality, design and value consumers have come to expect from Weider products. Icon intends to continue to sell equipment under the 'CrossBar by Weider' brand until this matter is resolved at trial.

"Although Icon disagrees with the court ruling and will exhaust all legal avenues of redress, Icon has already undertaken and will continue to undertake such actions as are necessary to fully comply with the ruling. We look forward to vindicating our rights at trial."

Icon's in-house intellectual property counsel Dave Stott told SNEWS, "At this stage, the preliminary injunction has been given, and now we're going to litigate the merits of the case."

SNEWSÂ® View: It looks as if the federal ruling may put the trademark infringement case, which has been languishing a bit as the patent case moved forward, back on the track toward a jury trial in the district court. We hear the district court judge Marsha Pechman has subtly "had it" with this case and the pissing and heel-digging that has been coming from both sides. Nevertheless, she's going to be stuck with this for awhile. Although both sides have been adamant in all the legal posturing and talk about not settling pre-trial (Com' on, what do you expect them to say?), the results of a Markman hearing couldÂ be --- how do we put this -- convincing to one side or another. We suspect there could be some kind of turning point in September on the patent side of this case. The trademark side is yet to be determined, but Icon was of course quick to act to abide by the court ruling, as noted by a 24-hour scramble to change website urls and all language on the Internet.

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